British Government Goes on ‘trial’ for Refusal to Permit Sale of North Sea Oil to Israel

September 20, 1985

LONDON (Sep. 19)

The British government will in effect go on public trial before the European Court of Justice in Luxembourg Thursday because of its long-standing refusal to permit the sale of North Sea oil to Israel.

The court, the supreme legal forum of the European Economic Community (EEC), will hear pleas that the ban on the UK oil supplies to Israel is illegal because it is incompatible with the 1975 association agreement between Israel and the EEC.

The issue is at the heart of a case involving two oil companies which had entered a deal for the sale of 13 shipments of North Sea crude oil from the big Sullom Voe terminal, in the Shetland Islands, four-and-a-half years ago.

The oil was being sold by Sun Oil Trading, a subsidiary of a big United States oil company, to Bulk Oil of Zug, Switzerland, intending to have it delivered to the Haifa oil refineries in Israel.

On ascertaining the destination, British Petroleum, operator of the terminal, refused to release it, on the grounds that it would be contrary to instructions from the British government.

Sun Oil Trading successfully sued Bulk Oil for $15 million loss of profits in a British court. However, Bulk won an appeal to the European Court over its claim that the British government’s prohibition breached EEC regulations.

VERDICT MIGHT TAKE A YEAR

The hearing in Luxembourg is expected to last only one day but it may be the next year before the judges deliver their verdict. The British government, as well as the two immediate litigants, is expected to be represented in the court.

Britain’s refusal to supply oil to Israel dates back to early 1979 at the time of the second world oil shortage. The then British Energy Secretary, leftwing Laborite Tony Benn, announced that because of the scarcity following the revolution in Iran, Britain would restrict its own deliveries to fellow members of the EEC and of the International Energy Agency.

This effectively excluded Israel, which had previously received most of its oil from Iron. Although Israel was not mentioned by name, some Israelis believe the British statement was designed to protect British oil companies from hostile Arab reaction if Britain had replaced Iran as Israel’s main supplier. Benn has privately denied this but says he carefully ascertained that Israel would not go short of oil before issuing his guidelines.

Although the British government’s restrictions were drawn up at a time of world oil scarcity, they have remained in force even though there is today a huge oversupply of oil.

Israel has no difficulty in buying as much oil as it wants, both under its long-term contracts with Egypt and Mexico and on the spot market, where it is fre- quently approached by dealers handling Arab oil. However, since the present glut may only be temporary, Israel says it remains interested in increasing the number of its regular suppliers. It has recently purchased oil from Norway and is interested in doing so from Britain and will therefore be keenly following the proceedings in Luxembourg.